1. A-One Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 20Y3.

   RevenuesAir Division	$ 1,018,000
   RevenuesRail Division	1,232,500
   RevenuesTruck Division	2,157,800
   Operating ExpensesAir Division	645,100
   Operating ExpensesRail Division	733,500
   Operating ExpensesTruck Division	1,304,900
   Corporate ExpensesShareholder Relations	154,800
   Corporate ExpensesCustomer Support	507,600
   Corporate ExpensesLegal	249,600
   General Corporate Officers Salaries	341,900

   The company operates three service departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the companys point of contact for new service, complaints, and requests for repair. The department believes that the number of customer contacts is an activity base for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is an activity base for this work. The following additional information has been gathered:

   	Air		Rail		Truck
   Number of customer contacts	4,700		5,600		8,500
   Number of hours billed	1,300		2,100		1,800

   Division management does not control activities related to the shareholder relations department and general corporate officers salaries.

   Required:

   Question Content Area

   a. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: Air, Rail, and Truck.

   A-One Freight Inc. Divisional Income Statements For the Quarter Ended December 31, 20Y3

   	Air	Rail	Truck
   Accounts receivableCashNet incomeRevenues	$- Select -	$- Select -	$- Select -
   Accounts receivableCashNet incomeOperating expenses	- Select -	- Select -	- Select -
   CashCustomer supportOperating income before service department chargesNet income	$- Select -	$- Select -	$- Select -
   Less service department charges:
   Accounts payableCashCustomer supportRevenues	$- Select -	$- Select -	$- Select -
   CashLegalManufacturing department chargesRevenues	- Select -	- Select -	- Select -
   Total service department charges	$fill in the blank 210aa705cfed02e_21	$fill in the blank 210aa705cfed02e_22	$fill in the blank 210aa705cfed02e_23
   Operating income	$fill in the blank 210aa705cfed02e_24	$fill in the blank 210aa705cfed02e_25	$fill in the blank 210aa705cfed02e_26

   Question Content Area

   b. What is the profit margin percentage of each division? Round to one decimal place.

   Division	Profit Margin
   Air Division	fill in the blank a0561d04e07104f_1 %
   Rail Division	fill in the blank a0561d04e07104f_2 %
   Truck Division	fill in the blank a0561d04e07104f_3 %

   Identify the most successful division according to the profit margin percentage.

   AirRailTruck

   3. All of the following statements are true regarding the evaluation of divisional performance for A-1 except:

   1. A better measure for A-1 Freight than the amount of operating income per dollar of earned revenue would be either rate of return on investment or residual income, because both measures incorporate asset utilization into the measures.
   2. A better measure for A-1 Freight than the amount of operating income per dollar of earned revenue would be either rate of return on investment or residual income, because the amount of assets used by a division in earning a return is a very important consideration in evaluating divisional performance.
   3. A better measure for A-1 Freight than the amount of operating income per dollar of earned revenue would be either rate of return on investment or residual income, because this company requires a significant investment in fixed assets and distribution facilities.
   4. All of these choices are correct.
   Select the correct answer from the choices above.:

   abcd

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